BUSINESS IN BRIEF 27/11

Cocoa of the Cho Gao (Rice Market) co-operative in the Mekong Delta province of Tien Giang has been UTZ Certified.

This certification program for agricultural products, launched in 2002, claims to be the largest coffee certifier in the world.

The certification is provided by the Swiss Association for International Cooperation, Helvetas in Vietnam, in co-ordination with the management board of the Tien Giang cocoa project.

By 2014, some 4,000 farming households in Tien Giang are scheduled to have benefited from the certification program.

The program is one of the agriculture projects being deployed by the organization in Vietnam.

Helvetas is non-governmental organization having operated in Vietnam since 1994 in the fields of agriculture, forestry and rural development.

Vietnam tax policy seminar held in France

A seminar on Vietnam’s tax and policies in its current process of international integration took place at the Pantheon-Sorbonne in Paris on November 19.

The event, organized by the Association of Vietnamese Scientists and Experts in France (AVSE), attracted Vietnamese and French experts, scholars, businesses, researchers and students living in Paris and surrounding areas.

At the seminar, Vu Duy Nguyen, lecturer from the Vietnam Academy of Finance, gave an overview of Vietnam’s tax policy since its entry to the World Trade Organization (WTO) and Henri Dang, a French tax consultancy expert, talked about the tax system in France.

The seminar mentioned various aspects of taxation which helped strengthen the mutual understanding between Vietnamese and French businesses aiming to seek investment and cooperation opportunities in Vietnam.

Nguyen Duc Khuong, President of the AVSE, said the event is one of the association's activities to promote Vietnam-France cooperation and encourage Vietnamese intellectuals living in France to contribute to Vietnam’s renewal process and its global integration.

Vietnamese steel under anti-dumping investigation

Ten Vietnamese steel producers were under investigation for dumping charges between April 1 and Sept 30, 2011.

According to the Competition Management Department under the Ministry of Industry and Trade (MoIT), the US Department of Commerce (DOC) officially investigated charges of dumping and subsidizing levied against steel products from India, Oman, the United Arab Emirates (UAE), and Vietnam.

The Vietnam Steel Association said Vietnam exported more than 1.5 million tonnes of steel last year and expects to increase its export volume over last year.

Da Lat to become an int’l resort centre

Prime Minister Nguyen Tan Dung has approved the adjustment of the zoning plan to 2030, with a vision to 2050, for Da Lat in the central highland province of Lam Dong.

Under the revised plan, Da Lat will become the political, administrative, commercial, and cultural centre, and the economic hub of Lam Dong province.

The city is also planning for an international standard tourism resort, a national centre for scientific research, training and technology transfer, as well as agricultural production and research, biological diversity protection.

Improving efficiency of northern border trade

Vietnam-China border trade activities are not facilitated as expected and Vietnamese businesses are often not active in exporting to the potential Chinese market.

Deputy Minister of Industry and Trade Nguyen Cam Tu made the statement at a meeting in Hanoi on November 18 reviewing trade activities across northern border lines in the 2006-2011 period.

Tran Bao Giam, Head of the Market and Border Trade Department under the Ministry of Industry and Trade (MoIT) said Vietnam has seven provinces bordering China’s Yunnan and Guangxi provinces. Vietnam-China border areas are considered a gateway to the key northern economic zone.

The Government and ministries have issued appropriate policies in line with border trade development, which facilitates import-export activities in the 2006-2011 period. With the ASEAN-China Free Trade Area, “two corridors and one economic belt” program between Vietnam and China and the expansion of the Greater Mekong Sub-region cooperation, these border gates will help boost trade exchange not only between Vietnam and China but also with other countries in the world, Giam said.

The MoIT has urged the Government to further strengthen border trade promotion activities, develop technical infrastructure, and encourage businesses to build distribution centres, transit warehouses, and special stores at border gates.

Swiss businesses keen on developing HCMC infrastructure

Swiss businesses have expressed their wish to help Ho Chi Minh City promote its economic development, especially infrastructure development.

During a meeting with the Municipal People’s Committee Chairman Le Hoang Quan on November 17, Swiss Economic Minister Marie Gabrielle Ineichen Fleish said Vietnam is of great importance to Switzerland, in a list of priorities for development cooperation.

The President of the Swiss Chamber of Commerce in Asia, Urs Lustenberger, said Swiss businesses are quite optimistic about Vietnam as a fast growing economy with inviting prospects.

Representatives of the Swiss company ABB said it can provide experts, solutions and equipment for HCMC to address its difficulties in the fields of traffic, power, and environment.

Meanwhile, Zurich international airport wants to cooperate with HCMC in modernizing the latter’s airport system to ease traffic overload and develop the local economy.

Nguyet, the store assistant at Phuong Tuan tile store on Hoang Quoc Viet Street in Hanoi, said Chinese granite tiles are highly popular thanks to their great variety of designs and colors.

She said the normal [Chinese] products cost an average of VND180,000-VND260,000 (US$12.5) a square meter, while those of higher quality fetch around VND500,000 a square meter, depending on the design.

These products are up VND 50,000 cheaper per square meter than the locally-made tiles, she said.

Tile traders in Hanoi said many customers had chosen Chinese products since their quality was acceptable while prices were much lower.

With this high consumption, many businesses have increased their imports of Chinese tiles, with some of them even bringing products in illegally in order to evade taxes, enabling them to sell the tiles at much lower prices.

Chinese tiles are also dominating the market in Ho Chi Minh City.

Nguyet Hong, who runs a tile store in District 10, said eight out of ten customers visiting her store go home with the Chinese tiles.

“This is thanks to the fact that they come in various designs at a low price,” she explained.

Nguyen Long, an employee from Minh Khoa Construction Co in Tan Binh District, showed Tuoi Tre a comparison he had made between a granite tile produced by a local manufacturer and a Chinese one.

“The color of the locally-made product is not as bright and shiny as its Chinese counterpart,” he said.

“Moreover, Chinese tiles cost around VND170,000 a square meter, while the minimum rate for the Vietnamese ones is VND180,000 a square meter.”

V, a construction contractor, said even in major construction projects, investors often preferred Chinese tiles for the aesthetics.

Other contractors also revealed that they could buy the products directly from the importers at prices VND30,000 a square meter lower.

Dinh Quang Huy, chairman of the Vietnam Building Ceramic Association, said the domestic tile making industry has been hit by a double-whammy.

“The frozen real estate market has lowered consumption this year, since many construction projects have been halted,” he said.

“But the Chinese tiles, many of which are smuggled to Vietnam, have only made the situation even worse.”

According to VIBCA, the industry is seeing a high unsold inventory of 30 million square meters of tiles as of late October, with the consumption of ceramic and granite tile recorded at 217 million square meters, which is only 70 percent of production.

Huy also said many Chinese tile importers have committed trade frauds.

One of the most common tricks, he said, was that the importers would reduce the products’ real values and quantities in their customs declaration.

“Although tiles imported from China attract a tariff of at least 25 percent, the real tax collection is far lower, since the values shown on the receipts are 50 to 70 percent less than the products’ real cost,” he said.

“This fraud has gone on for years and has become increasingly serious, hurting local tile makers; even driving some of them to the brink of bankruptcy.”

VIBCA has recently called on the government to chang the taxing method of Chinese-imported tiles to help local industry.

Accordingly, VIBCA proposed to calculate the import tax based on the tile’s area in square meter, rather than on receipts.

“Granite tile, for instance, should be taxed $5 to $15 a square meter,” he said.

“Under this system, the importers would no longer be able to declare a lower value to evade taxes.”

SOEs over-invest in non-core businesses: report

The SOEs have invested a total of VND21.8 trillion in non-core businesses in the last year, according to a report from the Ministry of Finance.

Of these, the banking sector received the largest investment, with VND10.1 trillion sunk in, the report said.

It was followed by the real estate, securities, and insurance sectors, with the respective figures of VND5.3 trillion, VND3.5 trillion, and VND2.2 trillion.

The Ministry of Finance said although the state-run enterprises had restructured to reduce their involvement in these sectors, the divestments had failed to meet targets due to global and domestic economic problems.

The government’s decree on the fund management of state-run enterprises would be issued by the end of this year, the ministry said.

“The decree will stipulate the right, duty and responsibility of the state-run companies on the use and management of funds invested in non-core sectors,” it said.

The economic effectiveness of SOEs, especially their investment in non-core businesses, has recently become a debatable topic at many National Assembly meetings.

In a report submitted to the NA last year, the government stated that the huge investment of SOEs in commercial banks, securities, insurance, and property companies had yielded little effectiveness.

The Prime Minister, in the NA’s second meeting session, also said the government would stay firm in increasing SOEs’ economic effectiveness, with the SOEs only focusing on their core businesses.

Earlier, many economic experts submitted a petition to the NA’s Economic Committee, urging for a restructuring of the SOEs in order to increase their operation effectiveness.

The petition demands that SOEs be banned from investing in non-core businesses, especially high-risk sectors such as banking, insurance, real estate and securities.

“The government should develop a plan for divestment and put an end to the SOEs’ involvement in non-core businesses next year,” the petition said.

Food products flow to Cambodia following floods

Traders in the Mekong Delta provinces have been busily collecting and exporting rice and other agricultural products to Cambodia to make up for the shortage caused by recent floods in the country.

Traders have blocked the Vinh Te canal at the Tinh Bien border gate in An Giang Province, waiting to buy rice from local farmers before heading to Cambodia, Sai Gon Tiep Thi reported.

They said demand for rice is very high in Cambodia and Thailand, both of which have been affected by devastating floods.

“Local farmers are happy since they can sell at good prices,” Nam Nhon, a trader in Chau Doc town, said.

He added that traders from Can Tho city, Vinh Long and An Giang provinces flock to Tinh Bien every day to collect rice.

Nguyen Thanh Hung, a customs official at the border gate, said dozens of boats loaded with rice pass through the gate to Cambodia on a daily basis.

At the Khanh Binh border gate and Long Binh market in An Phu District, other agricultural products have also been exported to Cambodia in large quantities.

An estimated forty tons of fruits and vegetables are shipped to the neighboring country every day via Long Binh market, local traders said.

Hien, a Vietnamese trader living in Cambodia, said the country was facing a severe shortage of certain vegetables such as cucumber, cabbage, pumpkin and chili.

“Prices have gone up by 30 percent and Vietnamese products are widely consumed in Cambodia,” she said.

A local agriculture official stated that Cambodia will remain a potential agricultural export market for An Giang in the years to come.

“[Cambodia] has yet to restore supply for its domestic market,” he said.

TV ads remain beyond reach of local businesses

Failing to afford the hefty sum to run TV ads, Da Lan -- a local toothbrush brand name -- can only hope to introduce its product to consumers via banderole like thisWith the cost of running an advertisement on television running to eight figures, many local businesses with shallow pockets have virtually no chance to introduce their products to consumers via this most widespread form of mass media.

This greatly hurts their competiveness against foreign rivals -- the multinational companies whose strong financial muscle allows them to spend millions of dollars on TV ads.

In the first three quarters of the year, the advertising industry has raked in nearly US$600 million in revenue, with TV ads accounting for $500 million of the total.

According to a report conducted by market researcher Kantar Media Vietnam, only seven Vietnamese brand names manage to enter the list of 20 businesses with the largest expenses on running TV ads as of last September.

Luong Van Vinh, CEO of My Hao Cosmetic Co, said most Vietnamese businesses were not capable of joining the race.

“My Hao Co spends most of its revenue on expanding the distribution system and has little to spare for putting a commercial on TV due to the exorbitant expense,” he said.

Vinh said despite their competitive quality, locally-made dishwashing liquids could reach far fewer consumers than foreign counterparts because of the poor investment in publicity.

Trinh Chi Cuong, director of Dai Dong Tien plastic manufacturer, said most small and medium-sized enterprises were reluctant to run an ad on TV due to the high expense.

“A 30-second ad on TV normally costs around VND35 million. This is no small sum for companies of our size,” he said.

Fabric softener and shampoo manufacturers are currently the biggest spenders who run their ads on air regularly.

Spending millions of dollar on ads and publicity campaigns, an unthinkable sum to local businesses, foreign manufacturers have handily beaten local businesses and dominated most of the market share.

For instance, one shampoo manufacturer spent a total of $8.1 million on TV ads in the first nine months of this year, according to Kantar Media.

Another international shampoo manufacturer increased their spending on TV ads by ten times to $5.7 million at a time when local businesses were forced to cut back on their operational expenses.

Ngo Thi Hoang Mai, deputy CEO of Lien Thanh Sauce Co, said the company had recently decided to run a six-month TV ad campaign worth millions of dong.

“The amount means nothing to giant foreign firms but we have to consider our decision very carefully,” she said.

Luu Duong, chairwoman of the Ho Chi Minh City Dipping Sauce Club, said local sauce manufacturers suffer the most from the overspending of foreign competitors in the advertising arena.

She said many small producers even went bankrupt because the giant Goliaths of modern times could easily crush the little Davids out of existence with their excessive spending on TV ads.

The dipping sauce sector is still reeling from the impact of the food scare that involved the use of the toxic substance 3-MCPD in soy sauce in 2008.

“Though many local producers have since made a lot of efforts to update their technology to make 3-MCPD-free products, their business still remains in the doldrums,” she said.

“It’s because they are financially unable to inform their consumers of the change via TV ads.”

Trade deficit slips 18 pct y-o-y: customs

Vietnam's trade gap in the first 10 months of this year hit $8.21 billion, down 18 percent year on year, according to the General Department of Vietnam Customs.

The country’s total export turnover fetched $78.56 billion during the period, up 35.5 percent from the same period last year.

Of which, the export turnover of foreign-invested enterprises (FIEs) accounted for 48.2 percent with $37.83 billion, rising 38.6 percent year on year.

Meanwhile, the total import spending in January-October hit $86.77 billion, up 27.7 percent year on year.

The import value of FIEs accounted for 44.8 percent with $38.89 billion, rising 31.2 percent year on year.

Vietnam's total trade deficit in October was $750 million, down 33 percent year on year and 50 percent month on month.

Previously, the General Statistics Office (GSO) has estimated Vietnam's trade gap in October to hit about $800 million, bringing the cumulative figure in January-October to $8.4 billion.

Vietnam’s total export revenue is likely to exceed this year's export growth target, said Nguyen Thanh Bien, Deputy Minister of Industry and Trade.

The country's trade gap ratio with some nations and territories, mainly China, Asean, Korea, Taiwan, has decreased gradually and much lower than 17.19 percent in the same period in 2010.

With highly rising export volumes and values, the government's plan to curb the trade deficit at below 16 percent will probably be realized, according to the Ministry of Industry and Trade.

In the remaining two months of this year, if the country's export reaches $8.5 billion per month, Vietnam's export turnover in 2011 would hit a record of $95 billion for the first time ever, Bien added.

Vietnam’s import and export revenues with China hit $19.577 billion and $8.562 billion in the first ten months of this year, up 22.6 percent year on year and about 57.5 percent year on year respectively, said the General Department of Vietnam Customs.

The trade gap with China in January-October was $11.015 billion, up 4.5 percent from the same period last year and equaling to 134 percent of the country's total trade deficit in the same period.

Vietnam's trade deficit with China in October was estimated at nearly $1.147 billion, up 3.4 percent from the same period last year.

The country spent $2.133 billion on imports of Chinese-made goods in October, up 22 percent year on year.

Of which, the country paid $385 million for machineries, equipments, instruments and other components, $250 million for computer, electronics and accessories, $243 million for cloth, $164 million for telephone and accessories, $110 million for fertilizer and $104 million for fuel.

Meanwhile, the country's exports to China reached $986 million in October, up 54 percent on year.

But the biggest export turnover came from raw materials only, including $219 million crude oil and $107 million rubber.

Electric bill to hike to help EVN cover losses

Raising the electric bill is the only way to help the Electricity of Vietnam Group (EVN) to cover its losses amounting to some VND10.126 trillion ($483.9 million) in 2010, said a state official.

“The hike should have been materialized sooner,” said Hoang Nhat Vuong, Minister of Industry and Trade, adding that the wait for the state-run power monopoly’s audit sheet release has caused the delay.

“The details about the time and price for the new electric bills cannot be unveiled now,” he told Tuoi Tre.

EVN raked in VND90.934 trillion from selling electricity last year, but its total costs exceeded over VND101 trillion, including VND78 trillion and VND16 trillion for power generation and transmission.

The dong devaluation alone caused a loss of VND15 trillion in 2010.

EVN’s assets formed only 30 percent of its total equity, while 70 percent are made up by foreign loans in US dollars, Japanese yen and euro from Asian Development Bank, World Bank, and Northern European credit institutions, said Pham Le Thanh, general director of EVN

“We are buying high-price electricity, but sell it at lower price, and so, we suffer the losses,” he said.

“The losses from other sectors, including telecom and financial investment, are excluded,” he added.

“We suffered a loss of VND10 trillion from using oil to generate power last year,” Thanh said.

EVN owed a debt worth VND11 trillion to power generation facilities under the Vietnam Oil and Gas Group (PetroVietnam) and Vietnam Coal and Minerals industries Group (Vinacomin) for coals used for thermo power plants last year.

EVN had to subsidize customers VND300 per every kilowatt hour we sell last year, and the rate surged to VND300,000 for end-users whose monthly electric bill passing VND1 million mark, he added.

But the industry-trade minister said the rate stood at VND100 for the year 2010, and it tripled to VND300 this year only.

Since there have been seven levels to calculate the power bills, not all the end-users enjoy the subsidies, he said.

For those who used up to 130 kWh a month, EVN did not have to spare any penny for subsidies, he added.

Regarding the fact that the electric bill rose 9 percent rather than 6.9 percent as pledged last year, the industry-trade minister said the difference was just the period of time used for calculation.

The former rate was calculated from March 1, 2009 to December 31, 2010, while the latter rate was figured from January 1, 2010 to December 31, 2010.

Concerning the fact that the public had raised the question over high income of the power sector’s employees, the EVN chief said the average monthly wage of EVN’s employees in 2009 was VND7.3 million, and fell by 5 percent in 2010.

“This rate is adequate for those living in rural areas, but is not enough to cover the costs of living for those who have a family to look after in urban areas,” he added.

The Ministry of Industry and Trade has completed a draft circular to regulate the competitive power market including responsibility for all players.

The circular will be applied to all licensed power plants with the capacity of over 30 megawatts and connected to the national grid must join the market, excluding build-operate-transfer (BOT), wind power and geothermal power ones, those under industrial parks selling only part of their output to the grid or without a long-term selling schedule.

The players will include companies that buy and sell electricity, generate electricity, operate an electricity system, transmit electricity and manage electricity usage.

Hydropower plants will offer prices starting from VND0 per kilowatt defined by weekly water prices.

Thermo power plants will be defined by factors like specific consumption, fuel prices and startup costs, starting from VND1 per kilowatt.

But the ceiling power price of the market is raised to VND1,400 per kilowatt given the ministry's regulation.

The ministry also asks the qualified power plants to apply to join the market and investors have the responsibility to complete an equipment system for connection, information and measurement system.

The market is now under a trial run with 48 out of 73 plants taking part and the government asks them to offer prices to the only buyer Vietnam Electricity Group (EVN).

For payment, 95 percent of the electricity is paid as provided in the contract between power plants and the electricity trading company and the remaining 5 percent is paid according to the hourly market price.

Learning from the pilot model, power plants will be suspended from joining the market if they provide false information in operation schedules and turbine mobilization, deal with others before offering prices to increase market prices and affect power security.

Investors suffer in apartment price cuts

Many secondary investors are willing to sell their apartment projects at loss by cutting prices by up to 30 percent, while the slashed price is in fact still enough to ensure profits for the primary investors.

The secondary investor is the last out of the many investors to whom a project is transferred from its initial investor.

Most of the discounted apartment projects have been bought and resold among many investors, making selling prices far higher than the real costs the initial investors had put in building them.

The Hoang Anh Gold House project in Ho Chi Minh City’s Nha Be District, for instance, was initially invested by Hoang Anh Gia Lai Group, who spent a total of VND73.6 million on the project.

In September of 2009, Hoang Anh Gia Lai Group transferred the entire project, which included 996 apartments, to the Bank for Investment and Development of Vietnam (BIDV) at a price of VND19 million a square meter.

Yet BIDV was not the final investor of the project, since the bank later transferred it to Saigon Mekong Co, but the deal’s value was unpublicized.

Earlier this month Saigon Mekong put 500 apartments of the project on sale and managed to sell 300 of them at the price of VND14.4 million a square meter, 35 percent lower than the rate it announced in 2009.

In this situation, Saigon Mekong Co is the only investor to incur losses on the apartments, while Hoang Anh Gia Lai Group, the primary investor, has profited from its deal with BIDV since the original cost of the project was only VND13.1 million a square meter.

In 2009 the real estate market also saw many investors slash prices on their apartment projects.

Two cases that shocked the market were the price cuts at the Hoang Anh River View and Phu Hoang Anh projects, in District 2 and 7, respectively.

Announced for sale with prices cut by as much as 45 percent, the two set a trend for other projects including the Truong Tho and Orient Apartment to offer price cuts.

Regarding the Hoang Anh River View project, whose price cut from $2,500 to $1,350 a square meter left insiders skeptical, a real estate expert from the Hoang Anh Construction and Development House JSC -- the project’s investor - said it was in fact a good move.

“Since the cost price of the project was only $1,200 a square meter, we could still earn profits with the discounted price of $1,350 a square meter,” he said.